Lucy and Sony

Sony's launch last week of PlayStation 3 reminds me of that "I Love Lucy" episode from 50 years ago in which Ricky figures out that the salad dressing Lucy sold in a TV commercial actually cost a few cents more to make than what she was selling it for. Lucy went back on TV to try to get customers to cancel their orders.

Sony's launch last week of PlayStation 3 reminds me of that "I Love Lucy" episode from 50 years ago in which Ricky figures out that the salad dressing Lucy sold in a TV commercial actually cost a few cents more to make than what she was selling it for. Lucy went back on TV to try to get customers to cancel their orders.

Fifty years later marketing is considerably more complex, as our teardown analysis of PlayStation 3 reveals. Sony loses something like $240 on each unit (see 'Teardown' finds Sony taking a bath on each PS3). Most astounding, Sony can't make enough to meet demand. (Sadly, the launch hype also included news stories of violence among wannabe buyers waiting on long lines in front of stores.)

What would my high school economics teacher have said? That Sony should raise the price on the PS3, at least initially, reducing demand and maximizing profit?

We all know why Sony won't operate that way. They need to build market share for the platform and establish it as something priced for mass appeal, they'll make up for the loss by selling software (the games), and the cost of manufacture will eventually come down. (Not to mention the simultaneous Blu-ray DVD format launch, with adoption of the disc format dependant on adoption of the game player format -- whew!)

Nevertheless, I wonder what Lucy might have said to Ricky if that salad dressing episode was created today. "Now Ricky, sure maybe we lose a little money on each jar of dressing, but you're not looking at the big picture. After we sell people the dressing we can sell them lettuce and tomatoes and croutons, and everybody knows croutons are where the real money is."